Amicus Curiae Brief — Reves v. Ernst & Young

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In THE

y Supreme Court of the United States

- ‘ OCTOBER TERM, 1991 ¢

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x Bos REVES, ROBERT H. Grsss, and FRANCES G YS & |

“ As Representatives of a Class of Note Holder = ao «& |

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us "3 Ernst & Youna, 124 S “ae

<i Respondent, & = = 8

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¥ On Writ of Certiorari to the ‘

EN : United States Court of Appeals A

see for the Eighth Circuit 9

_-\ < “BRUBPF OF THE AMERICAN FEDERATION OF LABOR :

4 »

AND CONGRESS OF INDUSTRIAL ORGANIZATIONS

AS AMICUS CURIAE IN SUPPORT OF RESPONDENT

ROBERT M. WEINBERG

MARTIN S. LEDERMAN

1000 Connecticut Avenue, N.W.

Washington, D.C. 20086

JED S. RAKOFF

COPY

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handhard

TABLE OF CONTENTS

INTEREST OF THE AMICUS CURIAE

SUMMARY OF ARGUMENT

ARGUMENT

A. The Statutory Structure

B. The Language of § 1962(c)

C. The Legislative History

l. RICO Generally

2. Section 1962

CONCLUSION

Page

TABLE OF AUTHORITIES

CASES

Averbach v. Rival Mfq. Co., 809 F.2d 1016 (3d

Cir.), cert. denied, 482 U.S. 915 and 484 USS.

GBB CIOOT) .... ........cccececescnsecceacseccosssseeneeee

Bank of America v. Touche Ross & Co., 782 F.2d

ebl. he A | |

Bennett v. Berg, 710 F.2d 1361 (8th Cir.) (en

banc), cert. denied, 464 U.S. 1008 (1983) ..... we

Cooperativa de Ahorro y Credito Aguada v. Kidder,

Peabody & Co., 758 F. Supp. 64 (D.P.R. 1991) .

Crandon v. United States, 494 U.S. 152 (1990) ....

Dole v. United Steelworkers of America, 494 U.S.

BE CRO) nn ccencccccecccecse.s0ccccuscnsscununeeeneeeeeenennnn

FCC v. American Broadcasting Co., 347 U. S. 284

Ty )) en

Feist Publications, Inc. v. Rural Tel. Serv. Co.,

Inc., US. , 111 S. Ct. 1282 (1991).......

Grunwald v. Bornfreund, 668 F. Supp. 128 (E.D.

> Fae |.) nrerennarn

H.J. Inc. v. Northwestern Bell Tel. Co., 492 U.S.

229 (1989) soc sos cecesceresesesunesiinseeneneiealnnananan

Hall American Center Assocs. Ltd. Partnership v.

Dick, 726 F. Supp. 1083 (E.D. Mich. 1989)

Jarecki v. G.D. Searle & Co., 367 U.S. 303 (1961) ..

King v. St. Vincent’s Hosp., —— U.S. ——, 112

S. Ct. 570 (1991) ....... seooussceensesmesenineeanenane

Massachusetts v. Morash, 490 U.S. 107 (1989)

Moffatt Enters., Inc. v. Borden, Inc., 763 F. Supp.

148 (CW.D. Pin. 2GQB) occcececeecescsncesencinneeneee

Moskal v. United States, 498 U.S. ——, 111 S. Ct.

GBI (1ODO) ..2n.ccccccccccoscvocccicnsnecseseenusessennenennnnn

NLRB v. Federbush Co., 121 F.2d 954 (2d Cir.

BOGE)... ....--c0.-scceccesesessnecconncesesniesnnneeinenenannnnnnnnnnnnE

Nationwide Mut. Ins. Co. v. Darden, —— USS.

, 118 &. Ct. 1966 CRBBRD on cccccccccceeee

Overnite Transp. Co, v. Truck Drivers Local 705,

004 F.2d 301 (Tth Clr, 1ODO) .......ccescccscssssececsssssenns

Parl: South Assocs. v. Fischbein, 626 F. Supp.

1108 (S.D.N.Y.), aff'd, 800 F.2d 1128 (2d Cir.

| RRC Se veceeseesouseneonseseienienneal —

Page

10, 24

iii

TABLE OF AUTHORITIES—Continued

Page

Petro-Tech, Inc. v. Western Co. & North America,

824 F.2d 1349 (3d Cir. 1987) . ee 10

Roeder v. Alpha Indus., Inc., 814 F.2d 29 (1st Cir.

Nee cesmunsnivmeeum 10

Sedima, S.P.RL. 1 v. Imrex Co., Inc., 473 U.S. 479

(1985) i hh 24

United States v. Bledsoe, 674 F.2d 647 (8th Cir.

1982), cert. denied, 459 U.S. 1040 (1982) _........ 12

United States v. Dennis, 458 F. Supp. 197 (E.D.

Mo. 1978) ai : oN SEI 17

United States v. Mokol, 957 F.2d 1410 (7th Cir.

Se 14

United States v. Nerone, 563 F.2d 836 (7th Cir.

1977), cert. denied, 435 U.S. 951 (1978) .......... 17

United States v. Seotto, 641 F.2d 47 (2d Cir.

1980), cert. denied, 452 U.S. 961 (1981) 6, 17-18

United States v. Turkette, 452 U.S. 576 (1981) _. 19

United States v. Yonan, 800 F.2d 164 (7th Cir.

1986), cert. denied, 479 U.S. 1055 (1987) .......... 14

Yellow Bus Lines, Inc. v. Drivers Local 639, 883

F.2d 132 (D.C. Cir. 1988), rev'd, 913 F.2d 948

(D.C. Cir. 1990) (en banc), cert. denied, ——

U.S. , 111 S.Ct. 2839 (1991) . 2

Yellow Bus 'Bhnes, Inc. v. Driver Local 639, 913

F.2d 948 (D.C. Cir. 1990) (en banc), cert. de-

nied, U.S. ——, 111 S.Ct. 2839 (1991)... passim

STATUTES

Organized Crime Control Act of 1970, Title IX

(Racketeer Influenced and Corrupt Organiza-

tions) :

18 U.S.C.§1961(1) . nae 5, 6, 7, 13

a passim

18 U.S.C. § 1962 (d) . ae to 7

18 U.S.C. § 1964 Se 24

Pub. L. No. 91-452, § 904 (a), 84 Stat. ae 24

TABLE OF AUTHORITIES—Continued

LEGISLATIVE MATERIALS

S. 1628, 91st Cong., Ist Sess. ..................................... -

S. 1861, 91st Cong., 1st Sess. .

115 Cong. Rec.

116 Cong. Rec.

9567 (1969) .

6992 (1969)

6995-96 (1969)...

585 (1970) ...

591 (1970) ..

592 (1970) _.

602 (1970)

607 (1970)

820 (1970)

Page

. 18, 20

18-19

.....21, 22, 23

18912-14 (1970)

18939 (1970)

18940 (1970)

35191 (1970)

IED ssiccrscsunsenibbeieepaicnnenas

TE si cechcdtidhiictorinninasiniscasineaden

|) TEE

SSS1Z (1976). .......................

36294 (1970)

36296 (1970)

Measures Relating to Organized Crime: Hearings

Before the Subcomm. on Criminal Laws and

Procedures of the Senate Comm. on the Judi-

ciary, 91st Cong., Ist Sess. (1969)...

House Comm. on the Judiciary, Report om Or-

ganized Crime Control Act of 1970, H.R. Rep.

No. 1549, 91st Cong., 2d Sess. (1970) 15,

Senate Comm. on the Judiciary, Report on Or-

ganized Crime Control Act of 1969, S. Rep. No.

617, 91st Cong., Ist Sess. (1969) _

19, 21

15, 19, 21-22, 23

TABLE OF AUTHORITIES—Continued

MISCELLANEOUS Page

Victoria G.T. Bassetti, Note, Weeding RICO Out

of Garden Variety Labor Disputes, 92 Colum. L.

SRE ES IRS cece cnr Ee Ome 2

Gerard E. Lynch, RICO: The Crime of Being a

Criminal, Parts I & II, 87 Colum. L. Rev. 661

MRNAS CLI OPN PROSE A tee Sm BE te 18, 20

David B. Smith & Terrance G. Reed, Civil RICO

FREER A ET ER ASAE hae SL i ee eae ed 9-10

Black’s Law Dictionary (4th rev. ed. 1968) ll

The Oxford English Dictionary (2d ed. 1989) 11

Webster’s Third New International Dictionary

SUEY cunnetahnidibinlnsineiselantehthbianiddill dessa shh ae ee 11, 15

IN THE

Supreme Court of the United States

OCTOBER TERM, 1991

No. 91-886

’ Bos Reves, Ropert H. Gress, and FRANCES GRAHAM,

As Representatives of a Class of Note Holders,

Petitioners,

ERNST & YOUNG,

Respondent.

On Writ of Certiorari to the

United States Court of Appeals

for the Eighth Circuit

BRIEF OF THE AMERICAN FEDERATION OF LABOR

AND CONGRESS OF INDUSTRIAL ORGANIZATIONS

AS AMICUS CURIAE IN SUPPORT OF RESPONDENT

This brief amicus curiae of the American Federation of

Labor and Congress of Industrial Organizations (“AFL-

CIO”) is filed with the consent of the parties, and in

support of respondent, as provided for in the Rules of

this Court.

INTEREST OF THE AMICUS CURIAE

The AFL-CIO is a federation of 89 national and inter-

national unions with a total membership of approximately

14,000,000 working men and women.

Since RICO was enacted, it has been become common-

place for the participants in labor disputes to attempt to

affect the balance of power through the bringing of

private civil RICO suits. See Victoria G.T. Bassetti, Note,

Weeding RICO Out of Garden Variety Labor Disputes, 92

Colum, L. Rev. 103, 122-23 & nn. 95-108 (1982) ‘enumer-

ating at least thirteen means litigants have used to trans-

form ordinary labor disputes into RICO suits ',

In particular, employers increasingly are using

$ 1962\c) against unions engaged in strike activities, on

the theory that a union conducting a strike against an

employer is by that fact alone “associated” with the

employer-enterprise, and that acts of picket-line wrong-

doing are racketeering activity that constitutes “partici-

patlion| in the conduct” of the employer-enterprise’s af-

fairs. See, e.g. Yellow Bus Lines, Inc. v. Drivers Local

639, 883 F.2d 132, 141-45 (D.C. Cir. 1988), rev'd, 913

F.2d 948 (D.C. Cir. 1990) (en bane), cert. denied,

US. , 111 S. Ct. 2889 (1991); Overnite Transp.

Co. v. Truck Drivers Local 705, 904 F.2d 391 (7th Cir.

1990).

That broad reading of § 1962(¢c) “would work a major

restructuring of our legal landscape,”’ in that it would

“givie] management a potentially powerful weapon to

wield against striking workers.” Yellow Bus, 913 F.2d

at 955. See also Bassetti, Weeding RICO, 92 Colum. L.

Rev. at 126 (RICO can serve as “bludgeon” in midst of

labor dispute). And so read, § 1962(c; “might apply in

the context of innumerable labor-management clashes,”

in a manner that would “reset the labor-management

balance” carefully crafted in the elaborate set of statutes

and regulations governing labor-management relations.

Yellow Bus, 913 F.2d at 955.

It is against this background—and for this reason—

that the AFL-CIO files this brief amicus curiae addressed

to the proper reading of § 1962 1c).

SUMMARY OF ARGUMENT

We demonstrate in this brief that 18 U.S.C. £ 1962¢e)

has a far more limited scope within the scheme of RICO—

a statute that itself has a limited scope—than petitioners

and the amici curiae on their side recognize. It is our

submission that £ 1962+c¢) addresses a particular category

of corruption of enterprises from within: corruption

through certain patterns of criminal activity committed

in the conduct of an enterprise’s affairs by persons who

are employed by or who are in a similar position to act

on behalf of the enterprise, and who are in a_ position

to play a part in directing the enterprise's affairs.

In showing that this understanding of the provision

is correct we analyze £ 1962'c¢1’s place within RICO's

structure, the literal language of the provision, and its

legislative background.

A. As we show in detail at pp. 7-10, infra, $ 1962

states its substantive prohibitions in three separately

enumerated subsections, each of which has a distinct role

in advancing the overall objectives of the statute. Sub-

sections ‘a) and ‘b) address two particular forms of

the corruption of legitimate enterprises from without.

Subsection (c: addresses a third—and a qualitatively

different-—-form of the corruption of enterprises: the

corruption of an enterprise from within. Each subseetion

wus meant to complement, not to overlap, the others.

Yet to read § 1962(¢) as petitioners and the amicus curiae

on their side do is to obliterate the differences in the roles

of subsections ‘a', ‘b), and ‘c!. Congress’ intent, as

evidenced by the structure of RICO, can be realized only

if the limits on the scope of each subsection stated in

that subsection are respected.

B. As we show in detail at pp. 10-18, infra, the

words of § 1962(c) set out three discernible limits that

define the essence of the provision’s prohibition. First,

subsection (c) contains a status requirement that is not

found in subsections (a) and (b): to come within

§$ 1962(c), a defendant must, as a threshold matter, be

“employed by or associated with” the enterprise. Refer-

ence to standard definitions, and application of basic

canons of statutory construction, establish that these

words restrict § 1962(c)’s coverage to only an enter-

prise’s employees or those who are in a similar position

to act on behalf of the enterprise.

Second, based again on the standard definitions of the

words used and fundamental rules of statutory construc-

tion, the phrase “to conduct or participate, directly or

indirectly, in the conduct of the enterprise’s affairs” is

properly understood as requiring that the defendant have

a role in directing the enterprise’s affairs. This interpre-

tation is in accord with the result reached by the Eighth

Circuit, sitting en banc, in Bennett v. Berg, 710 F.2d

1361, 1364 (8th Cir. 1983) (en banc), cert. denied, 464

U.S. 1008 (1983), and by the District of Columbia Cir-

cuit, sitting en banc, in Yellow Bus Lines, supra.

Third, subsection (c) also states that what is proscribed

is the use of a pattern of racketeering activity to conduct

the “enterprise’s affairs.” Thus, the provision does not

apply to the mere use of the enterprise’s resources or

facilities to facilitate a defendant’s conduct of his own

affairs that are distinct from the enterprise’s affairs.

C. As we show in detail at pp. 18-25, infra, the

legislative history of RICO, and more particularly of

£ 1962, confirms the reading of § 1962(c) just outlined.

Congress intended that the particular office of subsection

enterprises from within, through the use of patterns of

racketeering activity to conduct the affairs of enterprises.

ARGUMENT

At its core the argument of petitioners and the amici

curiae on petitioners’ side is that 18 U.S.C. § 1962(c)

is a catch all for any pattern of the wrongful conduct

specified in 18 U.S.C. § 1961/1) that has any effect on

an enterprise and that is committed by any third party

who has any relationship with the enterprise.

The foundation for that argument, on inspection, is

equal parts apocalyptic rhetoric and tendentious word-

splitting. What is notably absent is any recognition that

§ 1962(c) is one component part of an overall statute—

the Racketeer Influenced and Corrupt Organizations Act

of 1970 [“RICO”]—and that RICO in turn is a com-

ponent part of a compendious United States Code, and

of an overall legal system that includes an even more

comprehensive set of state laws.

As to the rhetoric, it is sufficient that the federa!

and state criminal and civil laws treat with fraudulent

conduct in a myriad of ways more than adequate to

assure that the Republic will survive if the words of

§ 1962(c) are read fairly and in context rather than as

if that provision were all that stood between the Ameri-

can people and rampant wrongdoing that is beyond legal

redress.

As to the language of § 1962(c), the method of peti-

tioners and the amici curiae supporting their pesition

is to focus selectively on particular words or phrases in

the provision, and to attribute to those words or phrases

in isolation the broadest allowable meaning, regardless

of whether that interpretation can be reconciled with the

remaining language of Subsection (c) or with the over-

all scheme of RICO’s prohibitions.

In one way or another, petitioners and the amici curiae

supporting them would have § 1962(c) read as covering

any person who commits a pattern of crimes specified

in § 1961(1) that affects, or that is otherwise related to,

an enterprise.

Petitioners come to this reading of § 1962(c) without

committing themselves to any particular interpretation of

the provision’s words. Instead petitioners simply enum-

erate a broad array of fact situations that subsection (c)

should, in their view, be found to cover. See, e.g., Pe-

titioners’ Brief [“Pet. Br.”’] at 37-40 & n.15.’

The Government’s brief rewrites the standard of

§ 1962(c) to provide for culpability whenever a defend-

ant is shown “to have taken part in carrying out the

activities of the enterprise by means of the prohibited

predicate crimes.” Brief for the United States as Amicus

Curiae Supporting Petitioners [“Govt. Br.”] at 16; see

also id. at 21. The Government then stretches this broad

standara beyond even its literal terms to cover, inter

alia, all of the cases within the following categories:

“whenever the defendant . . . uses the enterprise’s re-

sources or his association with the enterprise to facilitate

his crimes; or . . . targets criminal activity so as to cor-

rupt the enterprise’s actions.” /d. at 18.

Other of petitioners’ amici curiae embrace the open-

ended construction of § 1962(‘c) stated in United States

v. Scotto, 641 F.2d 47 (2d Cir. 1980), cert. denied, 452

U.S. 961 (1981):

We think that one conducts the activities of an enter-

prise through a pattern of racketeering when...

the predicate offenses are related to the activities of

that enterprise. [641 F.2d at 54 (emphasis added). |

1 Petitioners would prefer that this Court leave the proper inter-

pretation of § 1962(c) to develop on a “case-by-case basis.” Pet. Br.

at 41. To that end, petitioners suggest that the jury in every RICO

case simply be asked whether the defendant participated in the con-

duct of certain of the enterprise’s affairs through the specified

racketeering activity, with no further elaboration of what is meant

by those terms. /d. at 41-43,

See, e.g., Brief of Amicus Curiae National Association

of Securities and Commercial Law Attorneys (NASCAT)

in Support of Petitioners at 11-13; see also Brief of Ami-

cus Curiae National Association of Insurance Commis-

sioners in Support of Petitioners at 15 n.15 (“outsiders

to the enterprise who affect its affairs may be reached

under § 1962(¢)’’).

We demonstrate in this brief that § 1962/c) has a far

more limited scope within the scheme of RICO—a statute

that itself has a limited scope—than petitioners and the

amici curiae on their side recognize.

RICO as a whole deals not with repetitive criminal

activity simpliciter but with repetitive criminal acts that

constitute the means to corrupt an organization. And

$ 1962(c) addresses a particular category of corruption of

enterprises from within: corruption through certain pat-

terns of criminal activity committed in the conduct of an

enterprise’s affairs by persons who are employed by or

who are in a similar position to act on behalf of the

enterprise and who are in a position to play a part in

directing the enterprise’s affairs.

In showing that this understanding is correct, we first

put § 1962/(c) in its place within RICO’s structure; we

then analyze the literal language of the provision; and

finally we set out its legislative background.

A. The Statutory Structure

The statutory source for the reams of RICO judicial

decisions and academic, professional and lay comment is

disarmingly modest. Section 1961(1) sets out a list of

criminal wrongs each of which constitutes “racketeering

activity.” Subsections 1962(a), (b) and (e) then state

the three sets of circumstances in which a “pattern of

racketeering activity” constitutes a violation of the stat-

ute. Subsection 1962(d), in turn, makes it unlawful to

conspire to commit a violation of subsection (a), (b)

or (¢).

RICO’s substantive provisions on their face evince

a public policy of protecting ongoing organizations from

three different and specific forms of corruption accom-

plished through a pattern of racketeering activity.

Subsections (a) and (b) quite plainly address two par-

ticular forms of the corruption of organizations from with-

out—one by means of tainted funds, and the other by

means of overt criminality. Specifically, subsection (a)

prohibits the use of the proceeds derived from a pattern

of racketeering activity to acquire an interest in, to estab-

lish, or to operate an enterprise,” while subsection (b)

prohibits any person from using a pattern of racketeer-

ing activity to acquire or to maintain any interest in or

control of an enterprise.*

Thus, subsections (a) and (b) proscribe a pattern of

racketeering activity conducted by persons outside the

enterprise that is utilized by those persons as a means

to establish, gain an interest in, or take control over, an

enterprise that was not an instrumentality of the rack-

eteering activity.

* Subsection (a) provides, in pertinent part, that it

shall be unlawful for any person who has received any income

derived, directly or indirectly, from a pattern of racketeering

activity or through collection of an unlawful debt in which such

person has participated as a principal . . ., to use or invest,

directly or indirectly, any part of such income, or the proceeds

of such income, in acquisition of any interest in, or the estab-

lishment or operation of, any enterprise which is engaged in, or

the activities of which affect, interstate or foreign commerce.

3’ Subsection (b) provides that it

shall be unlawful for any person through a pattern of racketeer-

ing activity or through collection of an unlawful debt to acquire

or maintain, directly or indirectly, any interest in or control of

any enterprise which is engaged in, or the activities of which

affect, interstate or foreign commerce.

Subsection (ci addresses still a third—and a quali-

tatively different—form of the corruption of enterprises.‘

This subsection—on its face and, as we show below, on

detailed analysis—is addressed to the corruption of an

enterprise from within, and not to threats to an enter-

prise from the outside. In contrast to subsections (a)

and (b), which deal with corrupt methods of establish-

ing, or taking an interest in or control of an enterprise,

subsection (c) deals with corrupt methods by which in-

siders operate an enterprise.

In drafting RICO, then, Congress has gone to the pains

of stating its prohibitions in three separately enumer-

ated subsections, each of which appears to have a distinct

role, logically related to the others, in advancing an over-

all statutory objective. And so far as these structural

clues take us, the role of each suvsection is to comple-

ment, not to overlap, the others.

To read § 1962(c) as petitioners and the amici curiae

supporting petitioners have done is to obliterate the dis-

tinct roles of subsections (a), (b), and (c). On that

reading, subsection (c) certainly swallows all of sub-

section (b)’s prohibitions and possibly subsection (a)’s as

well.®

* Subsection (c) provides that it

shall be unlawful for any person employed by or associated with

any enterprise engaged in, or the activities of which affect,

interstate or foreign commerce, to conduct or participate, di-

rectly or indirectly, in the conduct of such enterprise’s affairs

through a pattern of racketeering activity or collection of un-

lawful debt.

* The predominate RICO pleading practice has been to proceed as

if subsections (a), (b) and (c) were meant to overlap. Plaintiffs

commonly assert multiple RICO violations—using all four sub-

sections of § 1962(c)—-arising out of a single set of facts, with

numerous real and constructed enterprises alleged, so that multiple

defendants can be joined and, in particular, so that defendants with

substantial financial resources can be reached. “Shifting enterprise

allega*ions for the sole purpose of targeting specific civil defendants

adds to the increasingly surreal image afflicting RICO allegations.”

David B. Smith & Terrance G. Reed, Civil RICO 7.02 at 7-22.3

That result should, at the very least, raise a caution

as to the construction of the subsection proffered by pe-

titioners and their allies. As this Court recently stated

in King v. St. Vincent’s Hosp., —— U.S. . , 112

S. Ct. 570, 574 (1991), “the meaning of statutory lan-

guage, plain or not, depends on context,” because

“|wlords are not pebbles in alien juxtaposition; they

have only a communal existence; and not only does

the meaning of each interpenetrate the other, but all

in their aggregate take their purport from the set-

ting in which they are used... .” (quoting NLRB

v. Federbush Co., 121 F.2d 954, 957 (2d Cir. 1941)

(L. Hand, J.)); see also Crandon v. United States,

494 U.S. 152, 158 (1990).]

And, as we next show, the result petitioners seek can be

reached only by failing to respect the limits on the cov-

erage of § 1962(c) stated in the language of the provision.

B. The Language of § 1962(c)

Subsection (c), as we have noted, forbids “any person

employed by or associated with any enterprise . . . to

conduct or participate, directly or indirectly, in the conduct

of such enterprise’s affairs through a pattern of racketeer-

ing activity... .”

These words set out three discernible limits that define

the essence of the subsection’s particular prohibition:

(1992). See, e.g., Petro-Tech, Inc. v. Western Co. of North America,

824 F.2d 1349, 1358 (3d Cir. 1987) (chart enumerating plaintiff's

six alternative theories of defendant’s RICO liability, using three

§ 1962 subsections, several alleged enterprises, and theories of con-

spiracy, respondeat superior and aiding-and-abetting); Roeder v.

Alpha Indus., Inc., 814 F.2d 22, 28-29 (1st Cir. 1987) (plaintiff

alleged that three defendants, and three other entities, “individually,

collectively and in any combination among them, is an ‘enterprise’ ’’) ;

Hall American Center Assocs. Ltd. Partnership v. Dick, 726 F. Supp.

1083, 1088-91 (E.D. Mich. 1989) ; Grunwald v. Bornfreund, 668 F.

Supp. 128, 133-34 (E.D.N.Y. 1987) (five different enterprises alleged,

including amorphous “association-in-fact”). See also Smith &

Reed, Civil RICO © 3.05 at 3-42 (describing the “protean nature

of the enterprise element and the gimmickry to which RICO juris-

prudence has succumbed”).

§ 1962(c) applies only to (1) an enterprise’s employees

and those who have an equivalent status, who (2) have a

role in directing the enterprise’s affairs, and who (3)

conduct, or participate in the conduct of, the enterprise’s

affairs through a pattern of racketeering activity.

1. Subsection 1962(c), first of all, contains a “status”

requirement that is not found in subsections (a) and (b).

To fall within § 1962(c), a defendant who has committed

racketeering activity must, as a threshold matter, be

“employed by,” or “associated with,” the enterprise in

question.

Webster’s Third New International Dictionary identi-

fies the relevant meaning of the verb “employ” as: “to

use or engage the services of,” or “to provide with a job

that pays wages or a salary or with a means of earning a

living.” Webster’s Third New Int’! Dictionary 743

(1986) ; accord, 5 The Oxford English Dictionary 190-91

(2d ed. 1989) (defining “employed” as “in (another's)

employ,” and in turn defining the noun “employ” as

“(t]he state or fact of being employed; esp. that of serv-

ing an employer for wages”). See generally Nationwide

Mut. Ins. Co. v. Darden, U.S. ——, 112 S. Ct. 1344

(1992).

Webster’s defines the verb “associate” to mean “to join

often in a loose relationship as a partner, fellow worker,

colleague, friend, companion or ally{;] to come together

as partners, fellow workers, colleagues, friends, com-

panions or allies.” Webster’s Third New Int’l Dictionary

at 132. Webster’s provides the following examples for

the use of the adjective form: “was associated with him

in @ large law firm”; “were closely associated with each

other during the war.” J/d.; accord, 1 Oxford English

Dictionary at 718 ‘identifying the principal meaning of

“associated” as “|jjoined in companionship; united in

action or purpose, sharing in dignity or office, allied’) ;

Black’s Law Dictionary 156 (4th rev. ed. 1968) (“asso-

ciate” “|s|ignifies confederacy or union for a particular

purpose”).

Thus, on the ordinary meaning of “employed by or as-

sociated with,” a defendant must be an employee of, or

be otherwise allied with or a partner of, the enterprise

in question in order to come within the proscriptions of

£ 1962 (e).

Indeed, the conjunction of the phrases “employed by”

and “associated with” requires that the interpretation of

the latter phrase be informed by its connection in the

statute to the former phrase. “The traditional canon of

construction, noscitur a sociis, dictates that ‘words grouped

in a list should be given related meaning.” Dole v.

United Steelworkers of America, 494 U.S. 26, 36 (1990)

(quoting Massachusetts v. Morash, 490 U.S. 107, 114-15

(1989)).° “Associated with” thus must be understood to

refer to some active role in the operation of the enterprise

that is distinct from yet akin to employment by the enter-

prise.

Equally to the point, “‘a court should give effect, if

possible, to every clause and word of a statute.’” Feist

Publications, Inc. v. Rural Tel. Serv. Co., Inc., —— U.S.

. , 111 S. Ct. 1282, 1294 (1991) (quoting Moskal

v. United States, 498 U.S. ' , 111 S. Ct. 461, 466

(1990)). Accordingly, the phrase “employed by or associ-

ated with” must be read to exclude from the coverage of

the subsection a category of persons who, in the absence

of the phrase, could be said to “participate . . . in the

conduct” of the enterprise’s affairs, but who do not have

the requisite relationship to the enterprise.’

* Use of this canon is particularly appropriate “where a word is

capable of many meanings in order to avoid the giving of unintended

breadth to the Acts of Congress.” Jarecki v. G.D. Searle & Co.,

367 U.S. 303, 307 (1961).

TIf the racketeering activity itself could establish the requisite

“association” with the enterprise, the “association” clause would be

rendered superfluous. If § 1962(c) is construed to give effect to all

its words, the provision “requires an association with an enterprise

which is distinct from participation in the conduct of the enterprise

through a pattern of racketeering activity.” United States v. Bled-

soe, 674 F.2d 647, 663 (8th Cir.) (emphasis added), cert. denied,

459 U.S. 1040 (1982). See also note 8, infra.

Specifically, the status requirement stated by the phrase

“employed by or associated with” should, at a minimum,

be understood to exclude from coverage an outsider with-

out the appropriate status who might be said to partici-

pate in the conduct of enterprise’s affairs by means of

some kind of leverage or influence over the enterprise

or its managers.” For example, the status requirement—

“employed by or associated with’—should exclude from

the coverage of the subsection a union representing the

enterprise’s employees, a business competitor of the enter-

prise, or the enterprise’s vendors and customers, even

though these entities or persons may be in a position to

*In this connection, petitioners argue that Congress’ inclusion of

bribery among the RICO predicate crimes somehow implies that a

pattern of bribery by a person outside an enterprise must constitute

a violation of §1962(c) in the following respect: the briber is

through his bribe participating in the conduct of the enterprise that

employs the bribee. If the subsection were not so interpreted,

according to petiitoners, “RICO’s coverage of bribery” would be

“virtually eliminate[d].” Pet. Br. at 37; see also id. at 37-39; Govt.

Br. at 20-21.

Putting aside other defects in this logic, the simple answer is that

the conduct petitioners describe might well be subject to RICO’s

prohibitions in ways other than that posited by petitioners. For

example, if the briber participates in the conduct of the affairs of

the entity that employs him through a pattern of bribery of other

entities, subsection (c) would apply to his corruption of his own

enterprise. Cf. Yellow Bus Lines, Inc., supra, 913 F.2d at 956 (union

official may violate § 1962(c) by participating in affairs of the union

through violence directed at employer). Or, a pattern of bribery

by an outsider could violate subsection (b) if the bribes were directed

at “acquir[ing| or maintain{ing] ... any interest in or control

of” the bribed enterprise. But if the statutory language is our guide

the fact that a pattern of bribery is involved does not necessarily

mean that a § 1962(c) violation has occurred at all, much less that

a §1962(c) violation has occurred with respect to the bribed

enterprise.

Thus, petitioners’ strained reading of § 1962(c) is not justified by

any need to maintain the viability of “bribery” as a § 1961(1) “rack-

eteering activity.” Petitioners, for the purpose of their litigation

strategy, would prefer a broader §1962(c) than Congress wrote—

one that covers bribes by outsiders to an enterprise—but that does

nothing to prove that Congress wrote such a broad provision.

exercise considerable leverage or influence over how the

enterprise conducts its affairs.’

2. Similarly, the natural meaning of the words, “to

conduct or participate, directly or indirectly, in the con-

duct of |the] enterprise’s affairs’—a clause that de

scribes a second necessary element of a violation of sub-

section (c)—also serves to delimit the application of the

provision.

Subsection (c)’s words do not proscribe a// participa-

tion in the enterprise’s affairs through a pattern of rack-

eteering activity. Congress did not state that the provision

applies to “any person employed by or associated with an

enterprise” who “participates in the enterprise’s affairs

through a pattern of racketeering activity.” Rather, the

provision adds the limitation that the employee or person

otherwise associated with the enterprise must engage in

racketeering activity to “conduct” the affairs of the enter-

prise or to participate “in the conduct” of those affairs.

As is true of the word “associated,” the word “con-

duct”—which appears in subsection (c) as both a verb

* For cases illustrative of these and related kinds of factual con-

figurations, but not necessarily of the analysis set forth in text, see,

eg., Yellow Bus Lines, supra (union conducted adversial strike

against enterprise employer) ; Overnite Transp. Co. v. Truck Drivers

Local 705, 904 F.2d 391 (7th Cir. 1990) (same); United States v.

Mokol, 957 F.2d 1410 (7th Cir. 1992) (deputy sheriff extorted pay-

offs from enterprise company in exchange for “protection”) ; United

States v. Yonan, 800 F.2d 164 (7th Cir. 1986) (lawyer bribed em-

ployee enterprise state attorney's office to influence disposition of

cases), cert. denied, 479 U.S. 1055 (1987); Moffatt Enters., Inc. v.

Borden, Inc., 7623 F. Supp. 143 (W.D. Pa. 1990) (manufacturer

fraudulently induced enterprise company to enter into distributor-

ship) ; Cooperativa de Ahorro y Credito Aguada v. Kidder, Peabody

& Co., 758 F. Supp. 64 (D.P.R. 1991) (broker fraudulently induced

enterprise savings-and-loan to make inappropriate investments) ;

cf. Averbach v. Rival Mfg. Co., 809 F.2d 1016 (3d Cir.) (litigant

filed false interrogatory answers with enterprise court), cert. de-

nied, 482 U.S. 915, 484 U.S. 822 (1987); Park South Assocs. v.

Fischbein, 626 F. Supp. 1108 (S.D.N.Y.) (litigants brought abusive

cases in enterprise court), aff'd, 800 F.2d 1128 (2d Cir. 1986).

and a noun—can bear a range of meanings, depending

on its context. Used as a verb, the principal meanings

are “to bring by or as if by leading: lead, guide, escort”;

“to lead as a commander”; and “to have the direction of:

run, manage, direct.” Webster’s Third New Int’! Diction-

ary at 474. Similarly, as a noun the word may be used

synonymously with “management” or “direction,” id. at

473, although, as petitioners and the Government empha-

size, as a noun “conduct” also can be used in a broader

sense to mean simply “the act, manner, or process of

carrying forward,” id. See Pet. Br. at 23 n.12, Govt. Br.

at 10.

Using the broader definition, and attributing that defi-

nition to the verb form of “conduct” as well as to the

noun form, § 1962(c) would read: “to carry out or

participate, directly or indirectly, in the carrying out of,

the enterprise’s affairs.” "’ This is the virtual equivalent

of: “to participate, directly or indirectly, in the enter-

prise’s affairs.” Thus, that reading, by rendering the “con-

duct” element meaningless, contravenes fundamental] prin-

ciples of statutory construction. See supra at 12."' As

' There is no basis in the statute for concluding that Congress

in drafting § 1962(c) intended a different meaning for the verb

“conduct” than for the noun “conduct.” As the Government correctly

notes, it is appropriate here to give “conduct” a similar construction

in both usages. Govt. Br. at 9.

A single, uniform construction of “conduct” is, indeed, supported

by the short-form description of § 1962(c) that is contained in both

the House and Senate Reports on RICO. Those reports say, simply,

that “[sJubsection (c) prohibits the conduct of the enterprise

through the prohibited pattern or collection.” House Comm. on

the Judiciary, Report on Organized Crime Control Act of 1970, H.

Rep. No. 1549, 91st Cong., 2d Sess. 57 (1970): Senate Comm.

on the Judiciary, Report on Organized Crime Control Act of 1969,

S. Rep. No. 617, 91st Cong., Ist Sess. 159 (1969). This sentence

strongly suggests that Congress meant “conduct,” used both as a

verb and as a noun, to connote “direction,” or “operation.”

'™ The District of Columbia Circuit, en banc, has criticized one of

the principal cases relied upon by petitioners for precisely this kind

the District of Columbia Circuit has pointed out, “Con-

gress ... did not proscribe mere participation in the

enterprise’s affairs through a pattern of racketeering

activity, but rather, subjected participation in the conduct

of an enterprise’s affairs to RICO liability.” Yellow Bus

Lines. Inc., supra, 913 F.2d at 954 (emphasis in original).

Accordingly, both uses of “conduct” in § 1962(c) should

be read according to the ordinary meaning of the verb

“conduct,” viz., “management” or “direction.” This is, in

essence, the construction adopted by the Court of Appeals

in the instant case, Joint Appendix at 275, and, sitting

en banc, in Bennett v. Berg, 710 F.2d 1361, 1364 (8th

Cir.) (en bane), cert. denied, 464 U.S. 1008 (1983):

Mere participation in the predicate offenses listed in

RICO, even in conjunction with a RICO enterprise,

may be insufficient to support a RICO cause of action

lunder § 1962‘c)|. A defendant’s participation must

be in the conduct of the affairs of a RICO enterprise,

which ordinarily will require some participation in

the operation or management of the enterprise itself.

Or, as the en bane District of Columbia Circuit put it in

Yellow Bus:

The “conduct of {the enterprise’s| affairs” thus con-

notes more than just some relationship to the enter-

prise’s activity; the phrase refers to the guidance,

management, direction or other exercise of control

over the course of the enterprise’s activities. In order

to participate in the conduct of an enterprise’s af-

fairs, then, a person must participate, to some extent,

in “running the show.” [913 F.2d at 954.|"

of selective reading of § 1962(c)’s words. In Bank of America

v. Touche Ross & Co., 782 F.2d 966, 970 (11th Cir. 1986), cited

favorably in Pet. Br. at 37, the Eleventh Circuit quite literally, by

use of ellipsis, “omitted the word ‘conduct’ in its statement of sec-

tion 1962(c)’s requirements.” Yellow Bus, 913 F.2d at 954.

12 Petitioners place great weight on the phrase “participate, di-

rectly or indirectly,” which petitioners remove from its context

3. Subsection (c) states as well that what is proscribed

is the use of a pattern of racketeering activity to conduct

the “enterprise’s affairs.”

Thus, subsection (c) cannot fairly be read to apply to

the mere use of the enterprise’s resources or facilities to

facilitate the defendant’s own affairs that are distinct

from the enterprise’s affairs. For example, if the officer

of a bank were engaged in illegal drug transactions on

his own account and occasionally used his phone at the

bank to conduct those transactions, he would not be con-

ducting the bank’s affairs through this pattern of illegal

drug transactions." By contrast, if the officer were using

his position within the bank to operate the bank so as to

provide a facility for laundering money received in drug

tranasctions, he would be conducting the bark’s affairs

through this pattern of racketeering activity.”

within the provision. Pet. Br. at 24-27, 39-40. That phrase, how-

ever, does not alter the remaining requirements of § 1962(c).

Whether “direct” or “indirect,” the “participation” must be partici-

pation in the conduct of the enterprise’s affairs, rather than simply

in the enterprise’s affairs without more. There is no reason to at-

tribute any more significance to the inclusion of “indirect” in the

subsection than Congress’ intent to cover those persons, employed

by or associated with an enterprise, who, while not formally clothed

with the authority to manage the enterprise, nevertheless have that

authority as a practical matter by virtue of their status. Thus, for

example, a major shareholder of a corporation may not be in a

formal position of management or decisionmaking, but may still

“indirectly” participate in the conduct of an enterprise corpo-

ration’s affairs by instructing those persons who «are in a formal

position to “conduct” the enterprise’s affairs in a particular way.

Cf. United States v. Nerone, 563 F.2d 836, 851 (7th Cir. 1977)

(no culpability under § 1962(c) where defendant's illegal gambling

operation merely occurred within the geographical confines of the

enterprise’s property), cert. denied, 4835 U.S. 951 (1978); United

States v. Dennis, 458 F. Supp. 197 (E.D. Mo. 1978) (no culpability

under § 1962(c) where defendant used access to the enterprise’s

facilities as a means for collecting his own unlawful! debts).

4 Cf, United States v. Scotto, supra, 641 F.2d at 51 (president

of enterprise union took bribes in exchange for, inter alia, his

C. The Legislative History

The legislative history of RICO, and more particularly,

of § 1962, confirms the reading of § 1962/c) just out-

lined. Congress intended § 1962 to proscribe racketeering

activity to infiltrate, to gain control of, or to conduct

organizations. The particular office of subsection (c)

is to address the specific problem of corruption of enter-

prises from within, through the use of patterns of rack-

eteering activity to conduct the affairs of enterprises.

1. RICO Generally

S.1861, 91st Cong., 1st Sess., the “Corrupt Organiza-

tions Act of 1969,” introduced by Senators McClellan and

Hruska in April 1969, is, in all relevant respects, the bill

that the fo'lowing year became the RICO title (title IX)

of the Organized Crime Control Act of 1970. The 1969

Act “in its essentials . . . was all but identical to the final

version of [RICO].” Gerard E. Lynch, RICO: The Crime

of Being a Criminal, Parts I & II, 87 Colum. L, Rev, 661,

676-77 (1987) [hereafter “Lynch, RICO”). In particular,

£1962 of S.1861 way in all material respects iden-

tical to the same provision that was enacted in RICO.

Therefore, “|a] proper understanding of the geals of

$.1861 ... is particularly important in understanding the

goals of RICO.” Lynch, RICO, 87 Colum. L. Rev. at 677.

The goals of S.1861 are nowhere more evident than in

the first line of the bill, which states that S.1861 is “A

BILL [t]o amend title 18, United States Code, to prohibit

the infiltration or management of legitimate organizations

by racketeering activity or the proceeds of racketeering

activity ....”’ (Emphasis added.) In introducing S. 1861,

Senator McClellan was clear about the problem the bill

was designed to address: “The problem, simply stated, is

that organized crime is increasingly taking over organiza-

tions in our country... .” 115 Cong. Rec. 9567 (Sen.

agreement to reduce number of worker’s compensation claims filed

through the union), cert. denied, 452 U.S. 961 (1981).

McClellan) (emphasis added). The bill was intended,

therefore, to attack the use of racketeering activity “in

the acquisition or operation of business.” Jd. (emphasis

added). In particular, Senator McClellan stated that

$ 1962 of S.1861 was intended to make it unlawful “to

acquire, control or operate organizations by the use of a

pattern of racketeering activity.” /d. (emphasis added).

This concern that organized crime was “taking over”

legitimate businesses and labor unions continued to domi-

nate Congress’ consideration of RICO the following year.

The concern was expressed repeatedly during the debates

and in the hearings before the House and Senate." And

this emphasis was again reflected in the House and

Senate Reports on the bills that became RICO."

15 See United States v. Turkette, 452 U.S. 576, 591-92 & nn.13-14

(1981) (citing the legislative history); 116 Cong. Rec. at 585 (Sen.

McClellan) (RICO drafted “to attack and to mitigate the effects of

racketeer infiltration of legitimate organizations”); id. at 35196

(Rep. Celler) (“[tlitle IX is designed to inhibit the infiltration of

legitimate business by organized crime’’) ; id. at 35206 (Rep. Kleppe)

(title IX covers “suppression of the infiltration of legitimate enter-

prises by racketeers or the proceeds of racketeering”) ; id. at 35295

(Rep. Poff) (title IX “provides the machinery whereby the infiltra-

tion of racketeers into legitimate businesses can be stopped and the

process can be reversed when such infiltration does occur”); id. at

55304 (Rep. Railsback) (“This title is designed to deal with the

infiltration of organized crime into legitimate business and labor.”) ;

id. at 35312 (Rep. Broomfield) (bill creates federal crime proscribing

“the infiltration of legitimate enterprises by the rackets”).

16 See House Comm. on the Judiciary, Report on Organized Crime

Control Act of 1970, H. Rep. No. 1549, 91st Cong., 2d Sess. 57 (1970)

[hereafter “House Report”] (“Section 1962 establishes a threefold

prohibition aimed at stopping the infiltration of racketeers into

legitimate organizations.” (Emphasis added.) ); Senate Comm. on

the Judiciary, Report on Organized Crime Controls Act of 1969, S.

Rep. No, 617, 91st Cong., Ist Sess. 159 (1969) [hereinafter “Senate

Report” | (same); see also id. at 76-78 (discussing “infiltration of

legitimate businesses” and “takeover of legitimate unions”).

Congress thus intended RICO to proscribe the use of

racketeering (directly or by use of the proceeds derived

therefrom) to become an insider in an enterprise, and

the use of racketeering by those who had become insid-

ers to run an enterprise.

2. Section 1962

The predecessor of S.1861—S.1623, 91st Cong., Ist

Sess.—did not contain anything like what is found in

$ 1962(c). The prohibitions of S.1623 were directed solely

at the investment of proceeds derived from criminal activ-

ity in legitimate enterprises. See 115 Cong. Rec. at 6992,

6995-96.

The Department of Justice, in remarks to the Senate,

criticized $.1623 as being “deficient” in some “major re-

spects.” One of those respects was that the bill “merely

prohibits the investment of prohibited funds in a business,

but fails to prohibit the control or operation of such a

business by means of prohibited racketeering activities.”

Measures Relating to Organized Crime: Hearings Before

the Subcomm. on Criminal Laws and Procedures of the

Senate Comm. on the Judiciary, 91st Cong., lst Sess. 387

(1969) (emphasis added).

In light of this criticism, Senators McClellan and Hruska

introduced S.1861, see supra at 18. This revised bill

added what we know today as §§ 1962(b) & (c), and thus

addressed the Justice Department’s criticism. As Pro-

fessor Lynch notes, “|wl]hile still serving the goal of

attacking organized crime’s involvement in legitimate

business, section 1962(c) takes a different approach to

the problem, prohibiting not the act of infiltration itself,

but the criminal activities committed by the infiltrated

racketeers.” Lynch, RICO, 87 Colum. L. Rev. at 682.

This reading is confirmed by the numerous instances in

the legislative history where the legislators explained

which enterprise-related acts of racketeering would be

”

made unlawful under § 1962 of RICO. The “threefold

standard” of prohibited activities in § 1962 is described

in the House and Senate Reports as follows:

(1) making unlawful the receipt or use of income

from “racketeering activity” or its proceeds by a

principal in commission of the activity to acquire an

interest in or establish an enterprise engaged in

interstate commerce [§ 1962(a)]; (2) prohibiting

the acquisition of any enterprise engaged in inter-

state commerce through a “pattern” of “racketeering

activity,” [$ 1962(b)] and (3) proseribing the oper-

ation of any enterprise engaged in interstate com-

merce through a “pattern” of “racketeering activity.”

[House Report at 35; Senate Report at 34 (emphasis

added). j

And, as the quoted passage exemplifies, whenever a mem-

ber of Congress described in shorthand form the various

prohibitions of § 1962, it was with reference to the “acqui-

sition or operation of” enterprises through racketeering

activity."”

T See, e.g., 116 Cong. Rec. at 602 (Sen. Hruska) (“Title IX of

this act is designed to remove the influence of organized crime from

legitimate business by attacking its property interests and by re-

moving its members from control of legitimate businesses which

have been acquired or operated by unlawful racketeering meth-

ods.”) (emphasis added); id. at 607 (Sen. Byrd) (“to acquire an

interest in businesses . . ., or to acquire or operate such businesses

by racketeering methods”); id. at 36294 (Sen. McClellan) (“to

acquire an interest in a business . . ., to use racketeering activities

as a Means of acquiring such a business, or to operate such a busi-

ness by racketeering methods”); id. at 36296 (Sen. Dole) (“using

the proceeds of racketeering activity to acquire an interest in busi-

nesses engaged in interstate commerce, or to acquire or operate such

businesses by racketeering methods”); id. at 35191 (Rep. Sisk)

(same exact language as in House Report, see supra at 21); id. at

35227 (Rep. Steiger) (“the use of specified racketeering methods to

acquire or operate commercial organizations”) ; ef. also, e.g., id. at

592 (Sen. McClellan) (RICO would “forfeit the ill-gotten gains of

criminals where they enter or operate an organization through a

pattern of racketeering activity”). See also Senate Report at 81

Congress’ intent, in other words, was to bring a halt

to the taking over of enterprises through racketeering ac-

tivity, and as a second line of defense to bring a halt to

the use of racketering activities as a means of operating

such entities by those who had come to contro] them.’

Representative Celler, who was the Chairman of the

House Judiciary Committee that voted out RICO in 1970,

and one of the principal sponsors of the Organized Crime

Control Act on the floor of the House, defined the prohibi-

tion stated in § 1962(c) this way: “The conduct of the

affairs of a business by a person acting in a managerial

capacity, through racketeering activity is . . . proscribed.”

116 Cong. Rec. 39196 (emphasis added).

(“Title IX attacks .. . the use of force, threats of force, enforce-

ment of i!legal debts, and corruption in the acquisition or operation

of business.”).

As these passages make clear, “acquisition” was the legislators’

shorthand word for the problem dealt with by subsections (a) and

(b), while “operation” of the enterprise was the shorthand for the

problem dealt with in subsection (c).

18 Senator Hruska explained some of the possible dangers posed

when the infiltrators operate an enterprise through racketeering:

When organized crime infiltrates a legitimate business, its whole

method of operation counters our theories of free competition

and acts as an illegal restraint of trade. Whether a business is

purchased from funds derived from its many unlawful activi-

ties, or whether it is acquired by extortion and violence, its aim

is monopoly. It employs physical brutality, fear and corruption

to intimidate competitors and customers to achieve increased

sales and profits. The vast economic power concentrated in this

giant criminal conglomerate constitutes a dire threat to the

proper functioning of our economic system. [116 Cong. Rec. at

602.)

For other examples of the way § 1962(c) might address the opera-

tion of enterprises through racketeering, see id. at 820 (Sen. Scott)

(“title IX may be a means to excise syndicate-infiltrated businesses

which use force to eliminate local competition and then charge ex-

tortion prices for staple commodities and services’) ; id. at 591 (Sen.

McClellan) (“Labor unions are infiltrated, and then labor peace is

sold to businesses.”) ; Senate Report at 78 (similar).

Similarly, Senator Hruska, a principal sponsor of

RICO in the Senate, stated that RICO was “designed to

remove the influence of organized crime from legitimate

business by attacking its property interests and by re-

moving its members from control of legitimate businesses

which have been acquired or operated by unlawful rack-

= methods.” Jd. at 602 (Sen. Hruska) (emphasis

a ).

In addition, the Senate Report discusses at length the

danger involved in the “tak[{ing] over” of businesses and

of unions by racketeering elements. Senate Report at 76-

78. Acoerding to the Report, the forfeiture and divesti-

ture remedies of RICO were intended to “dislodge” rack-

eteers from enterprises that they have “acquired or run

— racketeering methods.” Jd. at 79 (emphasis

added).

Having drafted the prohibitory subsections of § 1962

to accomplish these expressed objectives, Congress did

not intend that the provisions be applied to racketeering

activity that did not fit within the statutory bounds.

While the Organized Crime Control Act of 1970 was

being considered, critics of the bill raised concerns that

the racketeering activities were designed so broadly that

RICO would reach many crimes not necessarily typical

of organized crime. See 116 Cong. Rec. 18912-14, 18939-

40. Senator McClellan reassured these critics of RICO’s

limitations by explaining that the critical limitation is to

he found not in the § 1961(1) list of predicate crimes but

in the statute’s other requirements, including the specific

restrictions of § 1962:

The danger that commission of such offenses by other

individuals would subject them to proceedings under

title IX is even smaller than any such danger under

title III of the 1968 act, since commission of a crime

listed under title IX provides only one element of

title [X’s prohibitions. Unless an individual not only

commits such a crime but engages in a pattern of

such violations, and uses that pattern to obtain or

operate an interest in an interstate business, he is

not made subject to proceedings under title IX.

(116 Cong. Rec. 18940 (emphasis added).]|"

The interpretations of § 1962(c) proffered by petition-

ers and by the amici curiae supporting petitioners would

1% An uncodified section of RICO, § 904(a), see P. Law 91-452,

84 Stat. 922, 947, contains a “liberal construction” clause, which

states that “[t}he provisions of this title shall be liberally construed

to effectuate its remedial purposes.” For the following reasons, this

“liberal construction” clause cannot properly be the basis for a

broader construction of § 1962(c) than the one outlined above.

First, Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479 (1985),

suggests that the liberal-construction clause is confined to interpre-

tive questions posed by § 1964, RICO’s civil remedy provision:

The strict- and liberal-construction principles are not mutually

exclusive; § 1961 and § 1962 can be strictly construed without

adopting that approach to §1964(c). Indeed, if Congress’

liberal-construction mandate is to be applied anywhere, it is in

$ 1964, where RICO’s remedial purposes are most evident. [473

U.S. at 492 n.10 (citation omitted; emphasis added). }

As the passage from Sedima indicates, the proper principle of

statutory construction for resolving any ambiguity in the meaning

of $1962(c) is not “liberal construction,” but rather, the rule of

lenity. The rule of lenity applies because RICO’s governing standard

for civil liability is set forth in a criminal statute. See Crandon v.

United States, 494 U.S. 152, 158 (1990); see also HJ. Inc. v. North-

western Bell Tele. Co., Inc., 492 U.S. 229, 255 (1989) (Scalia, J.,

concurring) (“RICO, since it has criminal applications as well, must,

even in its civil applications, possess the degree of certainty re-

quired for criminal laws.”) (citing FCC v. American Broadcasting

Co., 347 U.S. 284, 296 (1954)).

In any event, as we have demonstrated in the text, when examined

in the context of the statute as a whole and with regard to Congress’

intent, the proper construction of §1962(c) can be discerned.

Use of the liberal-construction clause to go beyond what Congress

intended would be inconsistent with the appropriate judicial func-

tion. As this Court has said, that clause “ ‘only serves as an aid for

resolving an ambiguity; it is not to be used to beget one.’ Sedima,

473 U.S. at 492 n.10 (citation omitted).

ignore the limitations built into that provision and thus

render Senator McClellan’s assurances hollow.’

CONCLUSION

For the foregoing reasons, the decision of the Court of

Appeals for the Eighth Cireuit should be affirmed.

Respectfully submitted,

ROBERT M. WEINBERG

MARTIN S. LEDERMAN

1000 Connecticut Avenue, N.W.

Washington, D.C. 20036

Jep S. RAKOFF

MICHAEL L. WALDMAN

One New York Plaza

New York, New York 10004

LAURENCE GOLD

(Counsel of Record)

815 15th Street, N.W.

Washington, D.C. 20006

(202) 637-5340

* For the reasons more fully developed in the Brief for Respond-

ent, under the proper reading of § 1962(c), the RICO claim against

respondent in this case should fail. The acts in question here

were performed by respondent in its capacity as an outside, inde-

pendent auditor of the alleged enterprise—the farmer's coopera-

tive. In that capacity, respondent—by definition an independent

outside entity—did not meet the status requirement of § 1962(c).

Moreover, the performance of an independent outside auditor does

not constitute participation in the management or direction of the

enterprise beiny audited. The audit performed and the audit re-

ports issued by respondent were services provided to the cooper-

ative by a service vendor, services that by their nature could only

be performed by an independent, outside entity, and not by the

entity being audited. Respondent’s work on the audit and the oral

audit reports was part of the conduct of respondent's affairs, not of

the cooperative’s affairs. If respondent performed fraudulent inde-

pendent audits, or fraudulently reported on those audits, the wrongs

committed were in the conduct of respondent’s own enterprise, not

that of the cooperative'’s enteprise. )

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